Maximum-likelihood based inference in the two-way random effects model with serially correlated time effects
AbstractThis paper considers maximum likelihood estimation and inference in the two-way random effects model with serial correlation. We derive a straightforward maximum likelihood estimator when the time-specific component follow an AR(1) or MA(1) process. The estimator is easily generalized to arbitrary stationary and strictly invertible ARMA processes. In addition we consider the model selection problem and derive tests of the null hypothesis of no serial correlation as well as tests for discriminating between the AR(1) and MA(1) specifications. A Monte-Carlo experiment evaluates the finite-sample properties of the estimators, test-statistics and model selection procedures.
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Bibliographic InfoPaper provided by Stockholm School of Economics in its series Working Paper Series in Economics and Finance with number 383.
Length: 31 pages
Date of creation: 15 May 2000
Date of revision:
Publication status: Published in Empirical Economics, 2004, pages 79-88.
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Postal: The Economic Research Institute, Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden
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Panel data; autocorrelation; time specific effect; variance components;
Other versions of this item:
- Sune Karlsson & Jimmy Skoglund, 2004. "Maximum-likelihood based inference in the two-way random effects model with serially correlated time effects," Empirical Economics, Springer, Springer, vol. 29(1), pages 79-88, January.
- Sune Karlsson & Jimmy Skoglund, 2000. "Maximum-Likelihood Based Inference in the Two-Way Random Effects Model with Serially Correlated Time Effects," Econometric Society World Congress 2000 Contributed Papers, Econometric Society 1178, Econometric Society.
- C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
- C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
- C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2000-05-22 (All new papers)
- NEP-ECM-2000-05-22 (Econometrics)
- NEP-ETS-2000-05-22 (Econometric Time Series)
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